Based on Yuan Yuan (远远), 非赚不可 (Must Make Money: A Practical Stock Trading Guide for Chinese Retail Investors)
Must Make Money is a practical trading guide written for Chinese retail investors navigating the A-share market. The book takes a pragmatic, beginner-friendly approach, combining basic technical analysis with common-sense stock selection and disciplined money management.
Core philosophy: Making money in the stock market is not about being brilliant — it is about being disciplined, patient, and avoiding the mistakes that guarantee losses.
The book addresses the reality of Chinese retail trading:
Target audience: Retail investors with less than 3 years of experience who trade individual A-shares and want a practical, rule-based approach.
The book focuses on a small set of reliable tools rather than overwhelming beginners with dozens of indicators:
Moving Averages (均线系统):
| Moving Average | Purpose |
|---|---|
| 5-day MA (5日均线) | Short-term trend; trading signal |
| 10-day MA (10日均线) | Short-term support/resistance |
| 20-day MA (20日均线) | Medium-term trend direction |
| 60-day MA (60日均线) | Medium-term key support — "the lifeline" (生命线) |
| 120-day MA (120日均线) | Long-term trend — "the half-year line" |
| 250-day MA (250日均线) | Long-term trend — "the annual line" (年线) |
Moving Average Arrangement:
Bullish arrangement (多头排列):
5MA > 10MA > 20MA > 60MA > 120MA > 250MA
All MAs sloping upward
→ Strong uptrend; safe to hold long positions
Bearish arrangement (空头排列):
5MA < 10MA < 20MA < 60MA < 120MA < 250MA
All MAs sloping downward
→ Strong downtrend; avoid or sell
Tangled/convergent (均线粘合):
MAs converging to a narrow range
→ Preparing for a major move; wait for direction confirmation
| Pattern | Interpretation |
|---|---|
| Price up + volume up | Healthy advance; trend confirmation |
| Price up + volume shrinks | Advance losing steam; caution |
| Price down + volume up | Distribution; institutions selling |
| Price down + volume shrinks | Selling exhaustion; potential bottom forming |
| Sudden volume spike (3x+ average) | Major event; direction depends on price action |
| Persistent low volume | No interest; avoid until volume returns |
Volume Rules:
Bullish patterns to watch for:
| Pattern | Description | Reliability |
|---|---|---|
| Morning star (早晨之星) | Three candles: large red, small body, large green | High at support |
| Hammer (锤子线) | Small body at top, long lower shadow | High at support level |
| Bullish engulfing (看涨吞没) | Green candle completely engulfs prior red candle | High with volume |
| Three white soldiers (红三兵) | Three consecutive green candles with higher closes | Medium-high |
| Piercing line (刺透形态) | Green candle opens below prior low, closes above midpoint | Medium at support |
Bearish patterns to watch for:
| Pattern | Description | Reliability |
|---|---|---|
| Evening star (黄昏之星) | Three candles: large green, small body, large red | High at resistance |
| Shooting star (射击之星) | Small body at bottom, long upper shadow | High at resistance |
| Bearish engulfing (看跌吞没) | Red candle completely engulfs prior green candle | High with volume |
| Three black crows (三只乌鸦) | Three consecutive red candles with lower closes | Medium-high |
| Dark cloud cover (乌云盖顶) | Red candle opens above prior high, closes below midpoint | Medium at resistance |
Identifying key levels:
Rules for support and resistance:
The book requires all three conditions to be met before considering a stock:
Condition 1: Market trend is favorable (大盘配合)
Condition 2: Sector is strong (板块强势)
Condition 3: Individual stock shows technical strength (个股技术形态好)
While the book is technically focused, it requires a minimum fundamental screen:
| Check | Threshold |
|---|---|
| Not ST or *ST | Mandatory |
| Market cap | > 5B RMB (avoid micro-caps) |
| Revenue growth | Positive for most recent year |
| Net profit | Positive (not losing money) |
| Major shareholder pledge ratio | < 50% |
| No major lawsuits or regulatory actions | Clean record |
Maintain a watchlist (自选股) of 20-30 stocks:
Signal 1: MA Golden Cross (均线金叉)
Trigger: 5-day MA crosses above 10-day MA while both are above 20-day MA
Confirmation: Volume on cross day > 20-day average volume
Stop-loss: Below the 20-day MA
Strength: Moderate reliability; works best in confirmed uptrends
Signal 2: Pullback to Support (回踩支撑)
Trigger: Stock in uptrend pulls back to 20-day or 60-day MA
and shows reversal candlestick (hammer, bullish engulfing)
Confirmation: Volume shrinks during pullback, expands on reversal day
Stop-loss: Below the support MA
Strength: High reliability; best entry signal in the book
Signal 3: Breakout Above Resistance (突破阻力位)
Trigger: Price closes above significant resistance level
(previous high, neckline, descending trendline)
Confirmation: Volume > 1.5x 20-day average on breakout day
Stop-loss: Below the breakout level (now support)
Strength: High reliability when volume confirms; high false signal rate without volume
Signal 4: Volume Breakout from Consolidation (缩量整理后放量突破)
Trigger: After 10+ days of declining volume in a narrow range,
price breaks upward with volume > 2x recent average
Confirmation: Next day holds above breakout level
Stop-loss: Below the consolidation range low
Strength: Very high reliability; indicates accumulation complete
Before executing any buy order, confirm:
□ Market trend favorable (broad market above 60MA, MA rising)
□ Sector strength confirmed (sector outperforming market)
□ One of the four entry signals triggered
□ Volume confirms the signal
□ No major earnings announcement in next 5 days
□ Not buying in the last 30 minutes of a limit-up day
□ Stop-loss level identified before entering
□ Position size calculated (see Section 6)
□ Portfolio not already at maximum positions (5)
□ Not adding to a losing position
| Rule | Detail |
|---|---|
| Avoid Monday openings | Gap risk from weekend news; wait until 10:00 AM |
| Avoid last 10 minutes of Friday | Weekend holding risk; new positions can wait until Monday |
| Best entry time | 10:00-10:30 AM or 14:00-14:30 PM (past the opening volatility) |
| Never chase a limit-up board | If a stock hits +10%, do not queue to buy — wait for next day |
| Earnings blackout | Do not enter new positions 5 days before earnings release |
| Stop-Loss Type | Method |
|---|---|
| Technical stop | Close below the key support level identified at entry (MA or price level) |
| Percentage stop | -7% from entry price (hard stop for all positions) |
| Time stop | If position has not moved in your favor within 10 trading days, sell |
| Breakdown stop | If MA arrangement turns bearish (5MA crosses below 10MA below 20MA) |
Critical rule: Stop-losses are non-negotiable. Execute the sell order the moment the stop condition is met. Do not wait for "recovery."
| Method | When to Use |
|---|---|
| Target-based | Sell 50% at +15% gain; trail stop on remainder |
| Technical signal | Sell when bearish candlestick pattern appears at resistance |
| MA death cross | Sell when 5-day MA crosses below 10-day MA (short-term exit) |
| Volume divergence | Sell when price makes new high but volume decreases (bearish divergence) |
| 60-day MA break | Sell entire position if price closes below 60-day MA |
The book strongly recommends selling in tranches:
Position: 10,000 shares of Stock A
First sell (1/3): When profit reaches +15%
→ Sell 3,000 shares
→ Raise stop-loss on remaining 7,000 to breakeven
Second sell (1/3): When profit reaches +25% OR technical weakness appears
→ Sell 3,000 shares
→ Trail stop on remaining 4,000 to +10% level
Final sell (1/3): When stop is hit or major trend reversal signal
→ Sell remaining 4,000 shares
Sell immediately regardless of profit/loss:
Total investable capital: 100%
Allocation:
30% — Active trading positions (3-5 stocks)
30% — Reserve for adding to winning positions
30% — Cash reserve (for opportunities during market drops)
10% — Emergency fund (never invest this)
| Rule | Detail |
|---|---|
| Maximum single position | 20% of trading capital (not total capital) |
| Typical initial position | 10% of trading capital |
| Maximum number of positions | 5 stocks at any time |
| Minimum position | 5% of trading capital (below this, not worth the attention) |
| Adding to winners | Maximum 2 additions; each addition ≤ initial size |
| Never average down | Do not add to losing positions |
For more experienced traders, the book introduces a simplified position sizing formula:
Position size = (Win rate × Average win / Average loss - Loss rate) / (Average win / Average loss)
Example:
Win rate: 55%
Average win: 15%
Average loss: 7%
Win/loss ratio: 15/7 = 2.14
Position size = (0.55 × 2.14 - 0.45) / 2.14
= (1.18 - 0.45) / 2.14
= 0.73 / 2.14
= 34%
Practical adjustment: Use half-Kelly → 17% per position
This accounts for uncertainty and provides margin of safety
Only add to positions when:
Buy 1: 1,000 shares at ¥20 (initial position)
→ Stock rises to ¥22 (+10%), pullback to ¥21
Buy 2: 800 shares at ¥21 (pullback entry, smaller size)
→ Stock rises to ¥24, pullback to ¥22.50
Buy 3: 600 shares at ¥22.50 (final addition, smallest size)
Total: 2,400 shares, average cost ¥20.96
Stop-loss: Below 60-day MA or -7% from average cost
Level 1: Market Risk Control
→ Only trade when broad market is in uptrend
→ In downtrends, reduce total equity exposure to 30% or less
→ In crash conditions, go to 100% cash
Level 2: Sector Risk Control
→ Maximum 2 stocks from same sector
→ If sector breaks down, exit all sector positions
Level 3: Individual Stock Risk Control
→ Stop-loss on every position, no exceptions
→ Maximum -7% loss per position
→ Maximum 20% of trading capital per position
Level 4: Portfolio Risk Control
→ Maximum total portfolio loss per month: -10%
→ If hit, stop all trading for remainder of month
→ Review all trades, identify patterns, adjust system
The book introduces a strict monthly loss limit:
Rule: If total portfolio drawdown in any calendar month exceeds 10%,
STOP ALL TRADING for the rest of the month.
Rationale:
1. Losses compound — losing 10% requires 11.1% to recover
2. After a bad streak, emotional state deteriorates
3. Forced pause prevents revenge trading
4. Use the downtime to analyze what went wrong
Exception: May sell existing positions to reduce risk,
but may NOT open new positions
| Market State | Identification | Equity Exposure |
|---|---|---|
| Strong uptrend | CSI 300 above rising 20MA and 60MA | 60-80% |
| Mild uptrend | CSI 300 above 60MA, 60MA flat to slightly rising | 40-60% |
| Sideways/uncertain | CSI 300 between 60MA and 120MA, MAs tangled | 20-40% |
| Mild downtrend | CSI 300 below 60MA, 60MA declining | 0-20% |
| Strong downtrend | CSI 300 below declining 20MA, 60MA, 120MA | 0% (all cash) |
Every trade must be recorded:
Date: ___________
Stock: ___________
Action: Buy / Sell / Add / Reduce
Price: ___________
Shares: ___________
Position size: ___% of portfolio
Entry reason (for buys):
□ Market trend: _________
□ Entry signal: _________
□ Volume confirmation: ___
□ Stop-loss level: ______
Exit reason (for sells):
□ Stop-loss hit
□ Profit target reached
□ Technical signal
□ Time stop
□ Other: _____________
Emotional state: 1 (calm) to 5 (agitated)
Followed system rules: Yes / No
If no, what rule was broken: _____________
| Situation | Emotional Response | Correct Action |
|---|---|---|
| Stock gaps up 5% at open | Excitement, desire to chase | Wait for pullback; do not buy at open |
| Position down 5% | Anxiety, hope for recovery | Check stop-loss rules; if triggered, sell |
| Missed a big winner | Regret, desire to chase | Accept it; there will always be another opportunity |
| Three losses in a row | Frustration, self-doubt | Review journal; if system was followed, continue; if not, pause |
| Big profit on a trade | Overconfidence, desire to bet big | Stick to position sizing rules; one win does not change the system |
| Market drops 3% in a day | Fear, panic | Check if stop-losses are set; if yes, trust the system |
Evening (after market close):
1. Review today's trades and update journal (10 min)
2. Check all open position stop-loss levels (5 min)
3. Scan watchlist for tomorrow's potential entry signals (15 min)
4. Review broad market trend and key levels (5 min)
5. Write specific plan for tomorrow: what to buy, sell, at what price (10 min)
Morning (before market open):
1. Check overnight news for any position-affecting events (5 min)
2. Review the plan written last night (2 min)
3. Pre-set any buy/sell orders based on the plan (5 min)
4. Do NOT change the plan based on opening price action
| Mistake | Description | Consequence |
|---|---|---|
| No stop-loss | "It will come back" mentality | Small loss becomes catastrophic loss |
| Chasing limit-up boards | Buying stocks already up 10% | Trapped if momentum reverses next day |
| Overtrading | Trading every day out of boredom | Transaction costs accumulate; forced into low-quality trades |
| Fighting the trend | Buying falling stocks because they are "cheap" | Catching falling knives; losses compound |
| Ignoring market trend | Buying individual stocks in a bear market | Even good stocks fall in bear markets |
| Too many positions | Holding 10-20 stocks simultaneously | Cannot monitor effectively; dilutes winners |
| Averaging down | Adding to losers hoping for breakeven | Throwing good money after bad |
| Revenge trading | Immediately buying after a loss to "get even" | Emotional decisions, not analytical; leads to more losses |
| Weekend research bias | Making big decisions based on weekend reading | Emotions from weekend analysis do not reflect Monday reality |
| Selling winners, holding losers | Disposition effect | Systematically cuts profits short and extends losses |
| Ignoring volume | Buying breakouts without volume confirmation | High false breakout rate; trapped in failed moves |
| Prediction addiction | Trying to predict exact tops and bottoms | Impossible task; leads to premature entry/exit |
The book devotes significant attention to the psychological trap of holding losers until breakeven:
Scenario:
Buy Stock A at ¥20
Stock drops to ¥16 (-20%)
Investor thinks: "I'll sell when it goes back to ¥20"
Problems:
1. Stock needs +25% gain just to return to ¥20 (not 20%)
2. Capital is locked in a losing position for months/years
3. Opportunity cost: that capital could be deployed in winners
4. Psychological burden: checking the price daily, hoping for recovery
Correct approach:
Ask: "If I had ¥16,000 in cash today, would I buy this stock?"
If no → sell immediately, deploy capital elsewhere
If yes → you are holding for the right reason (future outlook), not the wrong one (past loss)
Date: Monday morning
Market check:
CSI 300: Above 20MA and 60MA, both rising → Uptrend confirmed ✓
Market exposure: Currently 40% invested, room to add
Sector scan:
Strong sectors this week: New energy, semiconductors, consumer
Weak sectors: Real estate, banking, mining
Watchlist review:
Stock B (new energy sector): Price consolidating for 15 days near ¥45
MA arrangement: 5MA ≈ 10MA ≈ 20MA (converging) above rising 60MA
Volume: Shrinking during consolidation (accumulation sign)
Fundamental quick check:
Not ST ✓, Market cap ¥30B ✓, Revenue growing ✓
No major pledge ✓, No lawsuits ✓
Setup: "Volume breakout from consolidation" pattern forming
Trigger: Price breaks above ¥47 (consolidation high) with volume > 2x average
Wednesday 10:15 AM:
Stock B opens at ¥46.50, rises to ¥47.20 by 10:00
Volume at 10:00: Already 50% of full-day 20-day average → volume surge ✓
Price: ¥47.20 (above ¥47 resistance) ✓
Entry signal: Breakout from consolidation with volume ✓
Entry execution:
Buy 2,000 shares at ¥47.30
Position size: ¥94,600 (12% of trading capital) ✓
Stop-loss set: ¥44.00 (below consolidation low; -7% from entry)
Profit target: First sell at ¥54 (+15%)
Day 2: Stock closes at ¥48.50 (+2.5%). Volume strong. HOLD.
Day 3: Stock closes at ¥49.80 (+5.3%). Raise stop to ¥46 (below 10MA). HOLD.
Day 5: Stock pulls back to ¥48.20. Volume shrinks. Normal pullback. HOLD.
Day 7: Stock surges to ¥51.00 on sector news. Volume spikes.
→ Consider adding position per pyramiding rules:
→ Stock profitable (+7.8%) ✓
→ Uptrend confirmed ✓
→ Pullback entry signal: Wait for pullback to add
Day 9: Stock pulls back to ¥49.50 (near 10MA). Hammer candle.
→ ADD: Buy 1,500 shares at ¥49.50
→ New average cost: ¥48.24 (3,500 shares)
→ Raise stop-loss to ¥47.00 for all shares
Day 12: Stock rises to ¥54.00. Profit target #1 reached.
→ SELL 1/3: Sell 1,200 shares at ¥54.00
→ Remaining: 2,300 shares
→ Raise stop on remainder to ¥50.00 (above breakeven)
Day 15: Stock reaches ¥57.00. Volume diminishing on the rise.
→ Volume divergence warning → Tighten stop to ¥53.00
→ SELL 1/3: Sell 1,100 shares at ¥56.50
Day 18: Stock gaps down to ¥53.50 on market weakness.
Closes at ¥52.80 (below 10MA but above stop at ¥53 — barely)
Day 19: Stock opens at ¥52.50, drops to ¥52.00.
→ Stop at ¥53.00 was breached on close yesterday → SELL remaining
→ SELL final: 1,000 shares at ¥52.00
Trade summary:
Buy 1: 2,000 shares at ¥47.30 → Sold in 3 tranches
Buy 2: 1,500 shares at ¥49.50 → Sold in 3 tranches
Total invested: ¥168,850
Total received: ¥189,350
Gross profit: ¥20,500 (12.1% on invested capital)
Net after fees: ~¥19,800
Journal entry: Good trade. Followed all rules. Volume divergence
was correctly identified. Could have sold more at ¥54-57 range.
Area for improvement: Partial exit sizing — consider larger first trim.
"非赚不可不是贪心，而是对纪律的坚持。" — "Must make money" is not greed — it is commitment to discipline.
"止损是交易者的安全带。你可以永远不需要它，但不系上就是拿命赌博。" — The stop-loss is a trader's seatbelt. You may never need it, but not wearing one is gambling with your life.
"大盘不好的时候，什么技术都没用。" — When the market trend is bad, no technical analysis will save you.
"会买的是徒弟，会卖的是师傅，会空仓的是祖师爷。" — He who knows when to buy is a student. He who knows when to sell is a master. He who knows when to stay in cash is a grandmaster.
"不要和股票谈恋爱。" — Do not fall in love with a stock.
"每一笔交易都应该有计划，而不是有冲动。" — Every trade should be backed by a plan, not an impulse.
"赚了一百次小钱，不如认真做好十次交易。" — Making small profits a hundred times is not as good as executing ten trades well.
"散户亏钱的根本原因不是技术不行，而是管不住手。" — The fundamental reason retail investors lose money is not poor technique but inability to control their hands.
"仓位管理是你唯一能控制的事情。你不能控制股价，不能控制市场，但你能控制买多少。" — Position sizing is the only thing you can control. You cannot control the stock price or the market, but you can control how much you buy.
"亏钱之后最重要的事不是赚回来，而是搞清楚为什么亏的。" — After losing money, the most important thing is not to earn it back, but to understand why you lost.